​As the COVID-19 pandemic has greatly increased demand for notebooks, we look at the notebook market in terms of the migration from a-Si (amorphous silicon) backplanes, which has been the category’s mainstay, to LTPS (Low temperature polysilicon), IGZO (Indium Gallium Zinc Oxide), and OLED.  Given that last year was a significant growth year for notebooks over a weak 2019, and this year is expected to see notebook shipment growth between 19% and 22%, unit volumes in the smaller share categories will substantial change, and given the relatively small number of producers in the smaller categories, the change could be important.
While LTPS is the most common backplane for smartphones, it has a small share of the notebook market, but one that should continue to grow.  It is a simpler production process than Oxide and has a generally higher yield, but oxide has the benefit of lower power usage, which is an important feature in mobile devices, despite its higher cost.  OLED is the new kid in town, as we have noted in the past, but is supported by Samsung Display (pvt) and parent Samsung Electronics (005930.KS), with Samsung targeting 4m units this year, ~11% above the projections below.  Given the strength of the notebook market we would lean more toward Samsung’s projection, although based on the lower forecast (3.6m units) for this year, the projection for 2022 would imply 6.3m units, or ~75% unit growth.  While Samsung Display is currently the sole supplier of OLED notebooks, China’s EverDisplay (688538.CH) is expected to begin commercial production sometime this year, although we would expect it will take some time to generate meaningful yields.
LTPS notebook displays are currently being supplied by AU Optronics, Chinastar (pvt) and Tianma (000050.CH), with AUO the dominant player and Innolux (3481.TT) expected to begin production later this year or early next year.  Given the higher volumes for IGZO notebooks, there are a number of panel producers building out or converting capacity toward this modality but current leaders ate LG Display (LPL), BOE (200725.CH), Sharp (6753.JP), and Panda (600775.CH) with HKC (248.HK) and Chinastar as the potential newcomers.
Amorphous silicon based notebooks will remain the most common, and while the technology will see some share decline by the end of next year.  That said, given the high volumes involved in a-Si notebooks and the infrastructure already in place, it will take a considerable amount of time to dislodge the technology from its dominant position, with Sharp and BOE offering the widest range of sizes and types.
All in over the longer-term, the high-end notebook market is the key to sustainability for panel producers, which does bode well for the newer backplane technologies, and the relatively limited number of producers gives those who were substantial producers before COVID-19 a distinct advantage, and with expectations of lower notebook shipments in 2022, the focus on those newer technologies to maintain ASP will be more intense.  As gaming has grown, there has been a shift from generic notebook panel production to panels with higher specifications, for which gamers are willing to pay, while on a global basis, more simplistic Chromebooks have sated the need of many in the education market pushing less focus on the mid-priced notebook segment and more toward the upper and lower ties, allowing those newer and more expensive technologies to grow.  Mini-LEDs will help to sustain all modalities other than OLED, which is self-emissive, but has just begun to build a real volume supply chain.  Couple Mini-LEDs and quantum dot enhancement together in a notebook and you have a potential challenger to OLED, albeit with both being at the top end of the notebook market.

OLED smartphones have been around technically since 2003, although the one OLED smartphone in that year, the Amoi S6, had only a 128 x 128 pixel grayscale OLED display, with Samsung releasing the first full color OLED display in 2004, sporting a massive 1.8” screen on its X120, and LG Electronics following in 2005 with a dual OLED display smartphone, the L5000, and by 2010 there were over 100 OLED smartphone models to choose from.  OLED tablets took a bit longer given the larger screen size, with Samsung’s Tab 7.7 in late 2011, although the use of OLED in tablets took longer to develop.

With estimates of almost 600m OLED smartphones being produced and over 700m small to mid-sized OLED devices total this year, OLED is no longer a ‘new’ technology and has found a significant place in the display world, but RGB OLED, the type that is used in such devices, has not progressed to IT devices, or has it?  We have looked at the laptop market, which would be the logical next-step for OLED displays, and were surprised to find such a large number of OLED laptops.  However we also found large discrepancies in estimates for the growth of that market, which is not all that surprising considering there are many ways it can be sliced, such as notebooks, all-in-ones, laptops, gaming laptops, Chromebooks, and even tablets, all of which can be included or excluded from estimates.  This leads to vast inconsistencies but using even the lowest possible estimate sources, ~2.6m units this year, the space is growing rapidly from almost nothing (~150,000 units) in 2019.
There are some limiting factors, particularly on the supply side as this relatively new segment must compete for capacity against high volume OLED smartphones, tablets, and smartwatches, all of which have well-established customers and justifiable pricing.  Large scale small panel OLED producers, such as Samsung Display (pvt), LG Display (LPL) and BOE (200725.CH), are careful to keep supply closely matched to demand, and  even with smaller Chinese OLED producers nipping at their heels, are careful not to over-expand and crater small panel OLED pricing.  However, if even the least aggressive estimates are calling for rapid expansion in the OLED notebook space, small panel OLED display producers will have to begin to dedicate more RGB OLED production to what are considerably larger notebook panel sizes, and with Apple (AAPL) looking to join the OLED tablet/laptop fray next year after converting its entire smartphone line, it is a topic close to the hearts of all small panel OLED suppliers.
Right now, OLED laptops come in two sizes almost exclusively, ~13.3” and 15.6”.  There are exceptions, but those two sizes are the current norm.  If we compare those two sizes against a typical 6.8” 9:16 smartphone display, the 13.3” notebook will take up 3.9 times the substrate space of the smartphone, while the 15.6” notebook would take up 5.3 times the substrate space, simply meaning that in a static capacity model if the mix between laptop sizes were even, the 2.6m OLED laptop estimate for this year would reduce the number of smartphones produced by over 12m units, creating a 2.1% shortfall in small panel OLED smartphone capacity.  While these numbers do match exactly to absolute fab production rates, they give a better understanding as to how the competition for small panel OLED capacity will fare as the OLED notebook market develops.
The number of OLED based notebooks varies on a daily basis as newer versions of models are added and older models are sold out, and not all models are available in the US, but the table below gives a sampling of some of those that have been announced and (hopefully) are available currently.  We note also that while some models show up on Amazon (AMZN) or Best Buy (BBY) sites, they are out of stock due to component shortages, and pricing, which we show only for reference, varies considerably with processor, memory, and drive configuration.  The pricing range is what we consider the most important.

​We have expressed our concern that many in the CE supply chain look at the demand seen over the last year and assume (or want to assume) that things will stay this way going forward.  While the residual effects of COVIS-19 lockdowns and sequestering will have some effect on the global social structure, as the COVID-19 pandemic eases, there seems to be a great desire among most to return to some more normalized way of life.  Some will remain in isolation for their own reasons, and some businesses that were already moving in such a direction will carry a higher percentage of remote workers, but we have trouble envisioning a ‘new world order’ where the global population remains in front of some sort of display for most of their day.  That is not to say things will change quickly, as the disparity between countries and regions as to their ability to control the virus will remain a gating factor, but unless we are speaking about a long-term generational change, we expect demand for those products that became dear during the pandemic will subside.
The timing of such changes will vary considerably, so we look at the CE space on a product by product basis, with some components that are difficult to make and require high cost and years to add capacity, remaining in demand for some time, but there are many others that have seen a big boost in demand over the last year, far exceeding the norm, that will gently return to what might be considered more normal growth.
One product category that has seen a very significant change in demand is notebooks, and a recent note from Taiwan based Trendforce, while reaming in their typical optimistic stance, ushered in the same caution that we expect to see in a number of CE products later this year.  After noting that global notebook shipments were up almost 20% last year, against a more typical 3% to 4%, they expect notebook growth to approach 15% this year, but decline 6% in 2022.  While that is heresy for one’s who almost always have a positive bias, they also add that they believe 3Q notebook growth will be flat and 4Q growth could be down 3%.
A considerable amount of the growth in notebook demand last year and this, has come from Chromebooks, non-Windows laptops that operate under Google’s (GOOG) Chrome OS and are designed to use the internet as a storage and application base.  As these notebooks are lower in price than a Windows™ based device might be, they have been the device of choice for stay-at-home students on a global basis.  Demand for Chrome books is based in the US, with only 30% of demand coming from other regions and Japan accounting for over 30% of the remainder, but as the US begins to emerge from the pandemic, demand for Chromebooks, much of which has been pulled forward over the last few quarters, will begin to slow, and Japan, whose GIGA School program has been a major demand pull, has begun to slow its procurement.
But…inventory levels are not excessive, as component shortages have limited buyers from achieving their purchase goals, so the slowdown will likely be a bit more gradual than a massive q/q shortfall, but at the same time, panel and component prices have also risen, making Chromebooks less profitable for brands such as Samsung and Acer (2353.TT), who have staked out a large claim in the space, and when there are other more profitable devices to sell CE brands will ask the question, “Chromebook?  Why not just come over here and look at this wonderful smart TV that gives you the same benefits and has a 65” screen.”  While the more optimistic view is that this will be just a small bump in the ‘new’ road we are on, we have no bias toward a particular product or CE producer, just 30 years of hearing the same ‘this time it’s different’ story at every cyclical juncture.